Mallory Pernell, Staff Writer
Ideology: Liberal | Writing from: Carleton College

A year ago today, the U.S. government took over mortgage companies Fannie Mae and Freddie Mac. On this anniversary of economic downfall, there comes a lesson: we need more government regulation to prevent our economy from collapsing.

Laissez-faire advocates are disgusted with the idea of regulation. In their eyes, free trade will solve any economic problem; after all, it is as easy as supply and demand. But after the Great Depression occurred, it became pretty obvious that greedy people prevent any sort of free trade from working without regulation.

Without the government stepping in, if you fail, you really fail, and pretty much everyone else around you. Sure, maybe you have the opportunity to make more money, but you also have the opportunity to lose it all. And with the tricky investments made today, one insurance company failing could mean the entire world’s economic downfall (AIG anyone?).

These laws were made for a reason. People argue that a true free market is better, because it can fix itself faster. Sure, a true free market may be able to fix itself faster, but the economic fallout that comes before the quick fix could also be more disastrous. If you think the economy is bad now, just imagine what it would be like if the government hadn’t stepped in. A report from NPR stated that if the government hadn’t bailed out Fannie Mae and Freddie Mac a year ago, “the case is pretty persuasive that this would be far worse than the Great Depression.”

In a true free market, greedy investors will just get richer at the working and middle classes’ expense The mortgage crash happened because of a lack of regulation: people were getting mortgages for houses they couldn’t afford, investment bankers were selling bundles of mortgages that they couldn’t guarantee, ratings agencies allowed the investments to slide without much thought, and the government didn’t do enough to stop this risky behavior. When people weren’t able to pay back their loans, the whole system broke. Maybe if the government had regulated these selfish transactions better, our economy wouldn’t be in the toilet. You think we would learn from this, but now investment banks are trying to get people to invest in bundles of life insurance policies. What is going to happen when that fails?

In a perfect society, a true free market would work. But in our society today we need government to step in when people’s eyes get bigger than their stomachs. There will always be greed around, and the government is the best thing we have to stop it.